The persistence of vacant or abandoned properties during the foreclosure process is a coronavirus crisis housing policy that is widely supported by a wide range of stakeholders.
Not foreclosing these properties is not the best outcome for these neighborhoods.
"If property is abandoned but not foreclosed in a timely manner, it will invariably affect the community," said Julia Gordon, president of the National Community Stabilization Trust, a nonprofit that specializes in promoting home ownership in distressed neighborhoods concentrated. "The best way to help homeowners stay in their home while protecting the neighborhoods is to provide an appropriate set of individual options instead of using the blunt tool of a foreclosure moratorium in lieu of effective harm reduction."
The mortgage forbearance option set out by the CARES Act on March 27, two weeks after the coronavirus pandemic was declared, gives consumers like Gordon a measure of confidence that many homeowners can avoid foreclosure – though Gordon doesn't believe that the legislation has gone far enough by this point to protect homeowners in need through proactive leniency.
If a bill were incorporated into the law to address these shortcomings in the leniency program, Gordon would find it more convenient to assist in the lifting of the foreclosure moratoria.
Cleveland real estate investors like Josh Cantwell agreed that vacant foreclosure properties shouldn't be put on auction sale – especially if many investors are willing, willing, and able to buy that property and get it in a relatively short time Time to occupy.
"Vacancy is certainly more attractive to investors because … you can likely get a better deal, get a lower price, and execute your strategy faster, whether it's a rehab for sale or a rehab to rent," said Cantwell , who is also CEO of Freeland Ventures, a real estate investment company that invests in apartment buildings in the Midwest and Southeast. “I don't see any benefit to the investor, I don't see any benefit to the homeowner, I don't see any benefit to the lender, I don't see any benefit to the community in leaving this property empty. For the most part, when the house is vacant, there there is no advantage in withholding foreclosure on anyone. "
Ripple effects on property prices
According to an Auction.com analysis of Attom Data Solutions' public data, the zombie foreclosures backlog that built up after the Great Recession continued to have an impact through 2020.
Out of 487 US zip codes with at least 10 zombie foreclosures and a zombie foreclosure rate of at least 10% (nearly double the national average at its peak in Q1 2014), average home prices for the first quarter of this year were just 7, 8% in the first quarter of 2007 on average higher than average house prices 14 years ago. Nationwide, average property prices rose by 20% in the same period of 14 years and in zip codes with below-average foreclosure rates for zombies in the first quarter. In 2014, average property prices rose by an average of 29%.
Among 25 zip codes with at least 10 zombie foreclosures and a zombie foreclosure rate of at least 25% in the first quarter of 2014, the average house prices in the first quarter of this year were still 7.7% below the average house prices in the same period of 2014 2007 on average after public data analysis. At the top of that top 25 list of the most zombie foreclosures in the first quarter of 2014 were Tampa-St. Petersburg, Fla .; Youngstown, Ohio; Baltimore; Indianapolis and Columbus, Ohio, subway areas.
Still wreaking havoc
Texas-based real estate investor Aaron Amuchastegui said he continues to see the negative impact of zombie foreclosures on property values - both for the vacant property itself and for surrounding properties.
"We received thanks from many neighbors after we bought the beaten, abandoned house because it poses a threat to the neighborhood, is a thorn in our side and lowers their property values," said Amuchastegui, who told the story of a recent one in Killeen , Texas, told home. Vacant property bought at a "Super Tuesday" foreclosure auction. "We signed up for rent the following Thursday, and within two weeks of the purchase a family had moved in and started renting them."
From empty to condominiums, faster
The demand for vacancies, zombies, and foreclosures from investors like Amuchastegui and Cantwell also benefits the stabilization of the neighborhood in the form of or an increase in home ownership. An analysis of 165,000 properties that were put up for foreclosure on the Auction.com platform in 2018 and 2019 shows that the majority (69%) of properties that were sold to third-party buyers and subsequently resold were owner-occupied within a year after the Foreclosure.
Meanwhile, only 46% of the properties that were returned to the lender in a foreclosure sale (owned by property) and subsequently sold through the multiple listing service – presumably with the aim of selling to owner-occupiers – were actually condominiums one year after the foreclosure auction.
Similar research by NCST found that most of the low home ownership rates for previously foreclosed houses were in high-pollution neighborhoods. While the NCST works to promote home ownership in these distressed areas too, Gordon said that an occupied property – even if it is a rental – is always better than a vacant property in terms of neighborhood stabilization.
"Home ownership is my number one goal, but I'd rather have it rented than sit there as a zombie foreclosure," she said.